[co-author: Brennan Meier]
THE FINAL RULES FOR THE COLLECTION OF CLAIMS OF THE CFPB OFFICIALLY COMING INTO FORCE ON NOVEMBER 30, 2021
On September 1, the CFPB officially withdrew its April 7 proposal to postpone the date of entry into force of its two rules revising Regulation F to January 29, 2022. Regulation F, as amended by the two final rules, puts implement the Fair Debt Collection Practices Act (Debt Collection Practices Act Final Collection Rules). The CFPB’s withdrawal of its proposal to delay the final debt collection rules was based on the fact that most industry players said they were ready to comply with the final debt collection rules by November 30, 2021, and that an extension would reduce regulatory certainty and increase the burden on smaller entities. The CFPB’s withdrawal of its old proposal means that the Final Debt Collection Rules will officially enter into force on November 30, 2021.
PROPOSED INTERAGENCY GUIDELINES ON RELATIONS WITH THIRD PARTIES: EXTENDED COMMENTS PERIOD
On July 13, the FRB, FDIC, and OCC (the Agencies) jointly proposed to issue revised guidelines on third-party risk management practices for banking organizations. The proposal establishes guidelines on how banking organizations can manage and assess risks in the context of relationships with third parties. Banking organizations would use the proposed guidance as a framework to develop their own internal protocols. The proposed guidelines, if adopted, aim to replace the existing recommendations of each agency on the subject. In response to comments from commentators for more time to analyze and reflect on the proposal, the comment period has been extended until October 18, 2021.
AGENCY PROBLEM GUIDE TO HELP COMMUNITY BANKS ASSESS FINTECH RELATIONSHIPS
On August 27, the agencies released the “Conducting Due Diligence on FinTech Companies: A Guide for Community Banks” (Guide), which aims to support responsible innovation within the federal banking system by providing banks community information that may be relevant when performing due diligence on FinTech companies in establishing business relationships with such FinTech companies. The Guide discusses six common areas of due diligence that community banks can consider, potential sources of information, and illustrative examples. The agencies indicated that the use of the guide is voluntary and that the topics covered should not be considered exhaustive. The use of the information and tools in the Guide must take into account the specific needs of the institution and the nature of its fintech system.
OCC ISSUES PROPOSAL TO CANCEL RULE OF COMMUNITY REINVESTMENT ACT 2020
On September 8, the OCC issued a notice of proposed rulemaking to replace the June 2020 changes to its Community Reinvestment Act (CRA) rules with rules substantially similar to those jointly adopted by the agencies in 1995. The June 2020 rules included new standards (such as an ARC valuation measure, retail loan distribution tests, and community development minimums) intended to incent banks to meet specific targets. However, due to implementation and clarity issues, the OCC proposes to revert to a set of rules that would be substantially similar to the 1995 rules.
The proposed rules would apply to all national banks and all federal and state savings associations. By reverting to the 1995 rules, the OCC hopes to improve the consistency and transparency of the CRA rules applicable to insured deposit institutions; limit the burden on banks, their communities and examiners; and ensure that the OCC continues to advance the objective of the ARC. In addition, the return to the 1995 rules would align the OCC rules on ARC with the current FRB and FDIC rules on ARC, which would allow agencies to jointly update the rules at the same time. ‘to come up.
It is important to note that until the June 2020 rules are repealed, the OCC will continue to apply these rules and all associated guidelines. If you wish to provide your comments, they must be received by the OCC no later than October 29, 2021.
“The publication of the OCC RNP… is an important step towards strengthening and modernizing the ARC. “
– Michael Hsu, Acting Head of the Office of the Comptroller of the Currency
SEC REQUESTS PUBLIC INFORMATION AND COMMENTS ON MATTERS RELATED TO THE USE OF DIGITAL ENGAGEMENT PRACTICES BY INVESTMENT DEALERS AND ADVISORS
On August 27, SEC staff (the staff) announced that they were seeking information and comment from the public regarding the use of Digital Engagement Practices (DEP) by brokers and investment advisers. DEPs include behavioral prompts, gaming features (commonly referred to as ‘gamification’), features or design elements intended to interact with retail investors on digital platforms, as well as the analytical and technological tools and methods that create and maintain the DEP. Staff are making this request in response to the proliferation of easily accessible digital platforms for investment by retail investors, such as online brokerage accounts, robo-advisers and mobile phone investing apps.
Staff said they are interested in understanding the market practices of brokers and investment advisers regarding the extent to which companies use DEPs, the types of DEPs most commonly used, and the tools and methods used to develop. DEPs, as well as company-verified information on investor demographics, business behaviors, and investment performance through DEPs. This request for public comment indicates the potential interest of staff in regulating the creation and use of DEPs by investment advisers and brokers.
LITIGATION & ENFORCEMENT
PROCEEDINGS AGAINST SPACS AS UNREGISTERED INVESTMENT COMPANIES
Over the past two weeks, a group of plaintiff attorneys have filed derivative lawsuits in a US federal court in New York against three Special Purpose Acquisition Companies (“SPAC”) – Pershing Square Tontine Holdings (“PSTH” ), GO Acquisition Corp. (“GO”), and E.Merge Technology Acquisition Corp. (“E.Merge”) – and certain directors and sponsors affiliated with PSPC, on behalf of serial applicant George Assad. Counsel for the plaintiff includes former SEC commissioner and current NYU law professor Robert Jackson, as well as Yale University law professor John Morley. The lawsuits allege, among other things, that SPACs are unregistered investment companies within the meaning of the Investment Company Act of 1940 (the “ICA”). While the size and importance of PSTH, and the new complexities of the now abandoned business combination between PSTH and Universal Music Group BV, have made PSTH a tempting target for the plaintiff bar, similar lawsuits against GO and E .Merge suggest a challenge to certain structural components of SPAC.
Read the Customer Alert for Goodwin’s take on the lawsuits.